A well-functioning market consists of two sides: suppliers who offer a particular good for sale and consumers who purchase those goods. In the Boulder Valley residential real estate market since 2012, there have been more consumers looking to buy homes than there were sellers offering homes for sale, which has led to a long appreciation period for homes. Now, however, it appears that the number of buyers is dropping as is their willingness to pay ever-increasing prices.
Spotting the trend
First, how do we know that there are fewer buyers in the market? The most direct measure of buyer activity that my company tracks (courtesy of Broker Associate Mike Malec) is the number of showings per available listing. From examining the data, it is fairly easy to see that this year’s showing activity is markedly below the recent boom years, but is still above the levels present during the recession.
Second, to further substantiate this decline in buyer activity, we can look at more indirect measures, such as average sales prices, available inventory of homes on the market, and average time a home will be on the market before sale. Each of these markers indicates a decline in buyer activity. Through May of this year, the average price of a single-family home in Boulder has fallen 0.6 percent, while the average attached unit has fallen 4 percent, compared to the same timeframe last year. This indicates that there are fewer buyers competing for available homes to the point where home appreciation rates have stalled. At the same time, the amount of homes available on the market has increased nearly 20 percent for single-family homes and almost 50 percent for attached ones, while the average time on the market for single family homes has gone up 5 percent and nearly 20 percent for attached ones. These statistics indicate that those buyers in the market are becoming choosier and are able to take their time making decisions.
Based on the above discussion, it seems that there are fewer buyers in the market and that those who are in the market are more cautious, but why?
It does not appear that our local economic conditions explain the drop in buyer activity. According to the State Demographer’s office, people are continuing to move into Boulder and Broomfield counties, albeit at a slower rate than previous years (though the city of Boulder has seen its population declining in the last two years). And local unemployment levels continue to be historically low.
Economic conditions at the national level are softening, to the point where the Fed is discussing interest rate cuts, so these conditions may play some role. But, interest rates are actually about half a percent lower than they were at this time last year, which would appear to weaken that argument.
Could it be the weather?
Another possible explanation I’ve heard is that our unusually cold and snow winter could have suppressed buyer demand as people were less willing to trudge through the snow to go see houses. While this is plausible, all else being equal, we would have expected to see that pent up demand being released as the weather improves, but we just have not seen that play out in the data yet.
Whatever the cause of the decline in buyer activity may be, local real estate legend Larry Kendall of the Group Inc. Real Estate in Fort Collins always says that buyers are the smartest people in the market, so they may be acting as the proverbial canary in a coal mine, meaning that they could be a leading indicator that our market is shifting from a seller’s market to either a balanced or buyer’s market. If you are a seller, be wary of pricing above the market in these shifting conditions.
Originally posted by Jay Kalinski is broker/owner of Re/Max of Boulder.
LOUISVILLE — Jay Kalinski, owner of Re/Max of Boulder, is opening a new real estate agency in Louisville under the Re/Max Elevate banner.
The Re/Max Elevate office, set to celebrate a grand opening May 1, is at 724 Main St.
Kalinski said agents had been clamoring for an office in eastern Boulder County because many live in that area and many have clients looking for homes in places such as Louisville, Lafayette, Firestone and Frederick.
“Over time, more and more of our agents have been working outside of the city of Boulder and outside of Boulder County,” Kalinski said,
And while the company considered opening the office in other nearby towns, “Louisville seemed to be a consensus choice,” he said.
The Re/Max Elevate office, technically a separate franchise from Re/Max of Boulder Inc., will launch with 15 agents. A handful are transferring from the Boulder offices, but most are newly recruited agents.
Kalinski said the office may be able to support as many 20 or 25 agents. For comparison, Re/Max of Boulder has about 115 agents.
Kalinski said the Louisville office will likely not be the last new location for his team.
“We’re in growth mode and looking to expand,” he said.
The decision on where to target for the company’s next office will — like the Louisville decision — be driven by input from agents and clients, he said.
Originally posted by Lucas High
Home sales for Boulder-area real estate got off to a slow start in 2019 despite fairly mild January weather, resulting in decreased sales compared with a year ago.
Single-family homes posted 184 sales, a decrease of 20.3 percent compared with 231 homes sold in the same month last year. Sales of condominiums and townhomes dropped 23.0 percent for the same period with 71 units sold vs. 92.
“The market saw a pretty significant slowdown that started mid-November and continued through January,” says Ken Hotard, senior vice president of public affairs for the Boulder Area Realtor® Association. “The fundamentals are still solid—inventory improved and interest rates aren’t going up quickly,” he says, noting that interest rates are historically low and affordable at around five percent or below for a 30-year fixed mortgage.
Month-over-month single-family home sales dropped 39 percent in January with 184 homes sold compared to 302 in December. Townhome/condo sales were a bit stronger, nearly matching December sales with a .013 percent decrease – 71 units sold vs. 72.
Inventory jumped 15.7 percent for single-family homes with 722 homes for sale in January compared with 624 in December. Attached dwellings showed even greater improvement, rising 18.1 percent—241 units vs. 204.
Hotard explains that for now the statistics represent a series of events. “Once we get enough data, we’ll start to see trends,” he says.
“There seems to be uncertainty in the market and buyers are thinking I can stay where I am and look for a better opportunity in the future,” says Hotard. “It’s a story that’s repeating itself in a number of markets across the country.”
Yet Boulder-area prices continue to rise or hold steady, job growth and the employment rate remain strong, and Boulder County is still a desirable place to live.
“Our strong fundamentals should attract buyers as we move through February.”
Originally posted by Tom Kalinski Founder RE/MAX of Boulder on Tuesday, March 14th, 2019.
There is a serious shortage of homes in Boulder, as is evidenced by the roughly 65,000 people who commute in and out of Boulder on a daily basis. About half of these people would live in Boulder if they could, but are forced to “drive until they qualify” for a home, which increases their carbon footprint, commute times, and overall stress level. It is clear that creative solutions are needed to address this crucial issue.
The Boulder City Council’s proposed pilot program to “help” middle income families purchase market rate homes is, while creative, a Faustian bargain, in my opinion. In the current iteration supported by members of the city council, the city would use a “loan-loss reserve fund” to guaranty second mortgages that would allow people to purchase more home than they would qualify for by themselves. (An earlier version from a 2016 white paper would have had the city use its bonding power to raise money to buy a percentage of a purchaser’s home, which the city would get back at closing, plus some amount of appreciation).
If the program stopped there, I would applaud the city’s effort for trying to get more families into homes that would be owner occupied. But here is where the Faustian bargain sets in. In exchange for the city’s assistance, the buyer would have to “voluntarily” agree to deed restrict the home they just purchased to be permanently affordable.
Let us consider the consequences of this for the individual or family who purchases a home under this program:
- All of the burdens. The buyers now have all of the burdens of homeownership. For example, if the furnace breaks or the roof wears out, the burden falls on the homeowner to replace them. If the home loses value, it is ostensibly the homeowner who bears the loss when they look to resell. And remember, in this fantasy, a lender is going to agree to loan buyers more money than the lender thinks they can reasonably afford because the city is going to guaranty a portion of the loan, which means the buyers will likely have more financial strain and be at a higher risk of default. Whether the city can sufficiently incentivize a bank to overlook that they would likely be overextending buyers financially remains to be seen.
- Limited rewards. While the homeowner is saddled with the burdens and risks of ownership, they do not reap the full reward of their home’s appreciation — the city sees to this through its deed restriction. Suppose homeowners do an outstanding job of upgrading and maintaining their home, and the market rises over the 10 years they own their home, the owners will not receive the fruits of their labor and good fortune of an appreciating market. Instead, the city will cap their appreciation at some percentage likely well below the market.
For the majority of Americans, their home is their biggest asset and primary source of wealth creation. The effect of the city’s program, then, is to make families who avail themselves of this program poorer over time relative to those who purchased homes on the open market.
It is, in my opinion, this asymmetry of unlimited risk and handicapped reward underlying the program that makes it so insidious.
If this wasn’t bad enough, let us now consider the consequences of this for the housing market in Boulder in general. The more unfortunate souls the city “helps” via this program, the fewer homes will be available on the open market. If the supply of homes is further restricted via this program, and demand for housing remains strong (remember the 30,000 commuters who would like to live in Boulder?), then the result will be home prices rising even faster. So, in an effort to create a number of “permanently affordable” homes, the city will make the rest of Boulder much more expensive.
Originally posted on BizWest. Jay Kalinski is broker/owner of Re/Max of Boulder.
2018 was another strong year for residential real estate in Colorado in general and Boulder Valley in particular, but what’s in store for 2019?
First, a look back at 2018. Nationally, Colorado jumped from 10th to fifth among all states for one-year appreciation, with a 9.16 percent increase in home values. Boulder County improved from 57th in 2017 to 41st in 2018, with over 9.5 percent price appreciation. Below are the 10 “Vital Statistics” for Boulder Valley we track to gauge the health of the real estate market from year to year.
As you can see, most of the indicators point toward an appreciating market, though increasing interest rates and a drop in the percentage of homes under contract indicate potential signs of weakness emerging.
In the city of Boulder, the average price of a single-family home topped $1,215,000, which was up 11 percent from 2017. However, Boulder also saw almost 50 fewer home sales than last year, which highlights our continued shortage of inventory. The most affordable city in Boulder County continues to be Longmont, but even there, the average price of a single-family home is now over $460,000 and may reach $500,000 if its appreciation trend continues.
One statistic that gets very little attention is that we often see home prices dip slightly in the second half of the year as compared to the first. As the chart below shows, we generally see appreciation through June or July, and then values trail off slightly. What this chart means is that, if you’re a seller your best bet is to sell in the spring, and if you’re a buyer, try to buy in the fall when home prices are stagnant or dropping.
2018 was quite strong — will 2019 be similar?
Locally, conditions in our area generally support continued appreciation in residential real estate. The total number of active listings available is still less than half of what it was before the Great Recession, which is likely to keep home prices growing, especially as our economy remains strong (very low unemployment) and we continue to see net migration into our area.
There are, however, several trends that could derail continued growth in our market. First, interest rates are almost a full point higher than they were in 2017, and I’ve discussed before how a one point increase in interest rates can reduce purchasing power by 10 percent. The Fed had indicated its intent to continue to raise rates in 2019, however, the news from the Fed’s most recent meeting in January suggested that they may hold off until at least June.
Second, the potential for a recession in the next year or two could begin dragging on home sales. One indicator is that the yield curve (which compares rates for short-term vs. long-term Treasury notes) has been getting flatter. When the yield curve inverts (that’s when rates for 10-year notes dip below rates for 2-year notes), it is very often followed by a recession.
Finally, local no-growth and anti-growth policies, regulations, and mindsets are making it increasingly difficult to add inventory to our region. The dearth of homes to sell could negatively impact our market — and it is the only factor here that we as citizens have a measure of control over.
2019 has the potential to be another great year for residential real estate in Boulder Valley, but we need to be mindful of the potential derailers mentioned above.
Originally posted on BizWest. Jay Kalinski is broker/owner of Re/Max of Boulder.
A tale of two markets emerged in November, as Boulder County’s single-family home sales skidded to a stop, while townhomes and condos took a significant leap forward.
Single-family home sales in the Boulder-area markets dropped 14.4 percent in November compared to October —310 vs. 362 homes—while condominium and townhome sales rose 14.5 percent—126 units vs. 110.
Yet when data for 2018’s first 11 months is considered, the two markets tracked closely together, and both appear to be slowing, according to Ken Hotard, senior vice president of public affairs for the Boulder Area Realtor® Association.
“This is the first month single-family home sales fell below last year, and condos and townhomes are only slightly ahead,” Hotard explains.
Year-to-date through November, sales of single-family homes decreased 1.4 percent compared to the prior year with 4,205 homes sold vs. 4,266. Attached home sales over the same period improved 3.3 percent – 1,445 vs. 1,399 units sold.
Inventory decreased in both housing categories, though more significantly for single-family homes, which dropped 13.1 percent in November compared to October with 821 vs. 945 Boulder County homes for sale. Condo/townhome inventory fell 6.1 percent in November compared to the previous month with 263 units for sale vs. 280.
“My guess is the growth of the townhome/condo market is due to a larger inventory and more affordable pricing,” says Hotard. “Interest rates are making people jumpy, but the reality is that mortgage rates are still historically low. The more complete view is the inventory and pricing dynamics of the Boulder-area markets.”
He notes that single-family home sales could recover in December, but it’s not likely.
“We have the ongoing headwinds of low inventory and rising prices. When we look back, we’ll see 2018 as market slowdown for housing in our market areas,” Hotard predicts.
Despite the slow-down in housing, Colorado’s economy continues to show strength, wage growth is increasing, and gross domestic product is up, according to recent news reports.
“What the Boulder-area needs is more housing that is desirable and more affordable for people,” adds Hotard.